Leaders commit to market with state control set to go beyond 50%
Published: 29 September, 2009, 20:04
Edited: 07 October, 2009, 07:01
Russian Federation, Moscow : Russian Prime Minister Vladimir Putin delivers a speech at an investment forum in Moscow on September 29, 2009. (AFP Photo / Natalia Kolesnikova)
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Russia is preparing for a new wave of privatization according to Prime Minister Vladimir Putin. The move could help not only improve Russia’s budget outlook, but also its image.
Addressing more than 800 top foreign and local investors at VTB Capital's forum on Tuesday, Prime Minister Putin underlined Russia’s commitment to a market economy, despite concern that the State’s role has been massively boosted over the past year, as it has sought to shield corporate Russia from the direst effects of the global financial crisis and economic downturn
“Despite the crisis we are not looking back towards large scale nationalization, or a shift to increased regulation, and this hasn’t occurred. We have kept capital flows free, and the Rouble convertible. This is a sure sign for investors. We are not returning to the past. Russia will remain a liberal market economy.”
Finance Minister, Aleksey Kudrin, echoed the sentiment. But although he concedes the State is currently in effective control of half the economy, and referred to reducing State involvement as a key goal, he alluded to the possibility it may come into control of still more in the short term.
“The government may increase its stake in problematic companies in the auto and defense industries, but for a very short term – one to two years. After that we will offer them to private investors."
The banking sector, where the State controls the top two players – Sberbank and VTB – has traditionally been seen as the one area where it will maintain its control. But the head of VTB’s retail-banking arm, Mikhail Zadornov, says the state may soon sell its stake in the bank.
“Depending on further development of the markets, a certain part of VTB shares will be sold to investors on the market. Time will tell when it will happen, but this will happen in the foreseeable future.”
Russia is facing its first budget gap in more than a decade. Selling state assets would help narrow – if not cover – this deficit. But the overt statements by Russia’s leadership, that it remains committed to the substance of a market economy in the short to medium term, echo recent comments by President Medvedev pushing for a more vibrant private sector. They will also help to ameliorate suspicions that rebounding crude prices – which add first to state coffers – could enable it to avoid market discipline for some time to come, and the possibility that key players may not understand the efficiency dividend that a robust private sector could provide.
29.09.2009, 18:45
1 comment
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Bianca even the Russian media are saying that there is no more BRIC only I/C India and china the investment into Russia is the lowest of any of the old BRIC countries. I note you did not mention the corruption and bureaucracy that Putin never got to grip with. Sorry Bianca I think Russia has missed the boat experts are predicting that most new investment will go to the new wave of emerging economies Ukraine Vietnam UAE.We see how Russia does business look at the case of TNK/BP.A company registered in a hut somewhere in the Urals bought $40,000 worth of shares just enough to give them the right to ask the authorities to check that the highly skilled foreign workers visas were in order, low and behold they found problems this was just one part of a campaign to force BP out and get Gazprom in. BP threatened to remove all its skilled workers it then dawned on whoever was behind the campaign that the company could not function with out these people. And the visa problem miraculously disappeared. only time will tell; we will soon see if investors have the confidence to invest,
R John, times have changed. This is a very shrewd move. Why put on sale profit making firms? They make a hefty profit for taxpayers, provide funds for reinvestment and good employment. However, the so called "losers" are going to be attractive. In the changed universe, investments in banking paper products have no appeal, and money will gravitate to the long-term real economy, that is, production. Already European countries are buying up aluminum scrap reprocessing plants, water recycling, etc. all over south-eastern Europe --- the kind of things nobody was buying before. This is a good time to move into privatization, as politically this will be more acceptable. However, the notion that Russia desperately needs the money, is nonsense. Russia, along with Brazil and China are snapping up IMF special drawing rights issue --- and that will translate into changed voting rights. Russia has been funding projects in many states --- from Belarus to Kyrgyzstan, and all over Africa and South America. This is a brand new tack on privatization, and no --- I do not think that Putin should have started this years ago. And where do you get the idea that Putin's years were spent "...confronting the west..." and "leaving Russian as an economic basket case"?? You are clearly not following the economic data. Russia still has vast currency reserves, in both the development fund, as well as contingency fund. In fact, both funds are not again growing, having been spent down quite a bit. Now, this is big difference from Western countries that have DEBTS and no reserves to speak off. Russia's foreign debt (government) is practically non-existent, and the State has been able to finance (bail out) private enterprises that were caught in an expansion during liquidity bust, as well as banks. This is actually a very comfy place to be in. Putin has built the Central Asian alliance, and Russia-China ties. I would not bet against him.
You would probably have to be in Russia and living under the present system to understand if what is being done is in the best interest of the people. Perhaps a survey {random} of the affected people {Russians} would give the leaders a clue as to the effectiveness of their policies and changes thereof. Of course you cannot lead entirely from opinions because sometimes people want things that dont make sense and are not in their best interest..